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United States securities and exchange commission logo
August 15, 2022
Tie Li
Chief Financial Officer
Li Auto, Inc.
11 Wenliang Street
Shunyi District , Beijing 101399
People s Republic of China
Re: Li Auto, Inc.
Form 20-F for the
Year Ended December 31, 2021
Filed April 19,
2022
File No. 001-39407
Dear Mr. Li:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 20-F for the Year Ended December 31, 2021
Item 3 - Key Information, page 1
1. Disclose clearly that
the company uses a structure that involves a VIE based in China and
what that entails, and
provide early in the summary a diagram of the company s corporate
structure, identifying
the person or entity that owns the equity in each depicted entity.
Describe all contracts
and arrangements through which you claim to have economic rights
and exercise control
that results in consolidation of the VIE s operations and financial
results into your
financial statements. Identify clearly the entity in which investors are
purchasing their
interest and the entity(ies) in which the company s operations are
conducted. Describe the
relevant contractual agreements between the entities and how this
type of corporate
structure may affect investors and the value of their investment,
including how and why
the contractual arrangements may be less effective than direct
ownership.
Tie Li
FirstName LastNameTie Li
Li Auto, Inc.
Comapany
August 15, NameLi
2022 Auto, Inc.
August
Page 2 15, 2022 Page 2
FirstName LastName
2. Disclose that trading in your securities may be prohibited under the
Holding Foreign
Companies Accountable Act if the PCAOB determines that it cannot
inspect or investigate
completely your auditor, and that as a result an exchange may
determine to delist your
securities. Disclose whether your auditor is subject to the
determinations announced by
the PCAOB on December 16, 2021.
3. We note your disclosure that the Cayman Islands holding company
controls and receives
the economic benefits of the VIE s business operations through
contractual agreements
between the VIE and your Wholly Foreign-Owned Enterprise (WFOE) and
that those
agreements are designed to provide your WFOE with the power, rights,
and obligations
equivalent in all material respects to those it would possess as the
principal equity holder
of the VIE. We also note your disclosure that the Cayman Islands
holding company is the
primary beneficiary of the VIE. However, neither the investors in the
holding company
nor the holding company itself have an equity ownership in, direct
foreign investment in,
or control of, through such ownership or investment, the VIE.
Accordingly, please refrain
from implying that the contractual agreements are equivalent to equity
ownership in the
business of the VIE. Any references to control or benefits that accrue
to you because of
the VIE should be limited to a clear description of the conditions you
have satisfied for
consolidation of the VIE under U.S. GAAP. Additionally, your
disclosure should clarify
that you are the primary beneficiary of the VIE for accounting
purposes. Please also
disclose, if true, that the VIE agreements have not been tested in a
court of law.
Part 1, page 1
4. At the onset of Part I, please revise to disclose prominently the
following:
whether your auditor is subject to the determinations announced by
the PCAOB on
December 16, 2021;
whether and how the Holding Foreign Companies Accountable Act, the
Accelerating
Holding Foreign Companies Accountable Act, and related regulations
will affect your
company, including the time frame change in PCAOB inspections for
two
consecutive years instead of three years;
whether you have been or expect to be identified by the Commission
under the
HFCAA; and
a cross-reference to your more detailed disclosure in your risk
factors, including the
heading of the risk factor.
5. At the onset of Part I, please disclose prominently that you are not a
Chinese operating
company but a [Cayman Islands] holding company with operations
conducted by your
subsidiaries and through contractual arrangements with a variable
interest entity (VIE)
based in China and that this structure involves unique risks to
investors. If true, disclose
that these contracts have not been tested in court. Explain whether
the VIE structure is
used to provide investors with exposure to foreign investment in
China-based companies
where Chinese law prohibits direct foreign investment in the operating
companies, and
disclose that investors may never hold equity interests in the Chinese
operating company.
Tie Li
FirstName LastNameTie Li
Li Auto, Inc.
Comapany
August 15, NameLi
2022 Auto, Inc.
August
Page 3 15, 2022 Page 3
FirstName LastName
Your disclosure should acknowledge that Chinese regulatory authorities
could disallow
this structure, which would likely result in a material change in your
operations and/or a
material change in the value of your securities, including that it
could cause the value of
such securities to significantly decline or become worthless. Provide
a cross-reference to
your detailed discussion of risks facing the company as a result of
this structure.
6. At the onset of Part I, provide prominent disclosure about the legal
and operational risks
associated with being based in or having the majority of the company
s operations in
China. Your disclosure should make clear whether these risks could
result in a material
change in your operations and/or the value of the your securities or
could significantly
limit or completely hinder your ability to offer or continue to offer
securities to investors
and cause the value of such securities to significantly decline or be
worthless. Your
disclosure should address how recent statements and regulatory actions
by China s
government, such as those related to the use of variable interest
entities and data security
or anti-monopoly concerns, have or may impact the company s ability
to conduct its
business, accept foreign investments, or list on a U.S. or other
foreign exchange. Please
disclose whether your auditor is subject to the determinations
announced by the PCAOB
on December 16, 2021 and whether and how the Holding Foreign Companies
Accountable Act and related regulations will affect your company.
7. At the onset of Part I, clearly disclose how you will refer to the
holding company,
subsidiaries, and VIEs when providing the disclosure throughout the
document so that it is
clear to investors which entity the disclosure is referencing and
which subsidiaries or
entities are conducting the business operations. Refrain from using
terms such as we or
our when describing activities or functions of a VIE. For
example, disclose, if true, that
your subsidiaries and/or the VIE conduct operations in China, that the
VIE is consolidated
for accounting purposes but is not an entity in which you own equity,
and that the holding
company does not conduct operations. Disclose clearly the entity
(including the domicile)
in which investors are purchasing an interest.
Our ADSs will be prohibited from trading in the United States under the HFCAA
in 2024....,
page 23
8. We note your disclosure about the Holding Foreign Companies
Accountable Act. Please
expand your risk factor to disclose whether you have been or expect to
be identified by the
Commission under the HFCAA and what impact this may have on your
ability to continue
to offer your securities.
Item 3.D. Risk Factors
You may experience difficulties in effecting service of legal process...., page
49
9. As it appears your officers and directors are located in China, please
revise your filing to
also include a separate Enforceability section, to disclose the
difficulty of bringing actions
and enforcing judgements against these individuals.
Tie Li
Li Auto, Inc.
August 15, 2022
Page 4
ITEM 5.Operating and Financial Review and Prospects
Results of Operations
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020, page 116
10. Please expand your discussion of your consolidated operating results
to provide a more
comprehensive discussion and analysis of the factors that impacted
your results between
comparative periods. Please revise to more fully address the
following:
Quantify how much of the increase in revenue, from
period-to-period, was due to
changes in vehicles sold, changes in selling prices and/or changes
in products and
services. Please also discuss and quantify the impact of revenues
from other sales and
services; and
In circumstances where there are multiple business reasons for
changes in income
statement line items, please quantify each business reason. For
example, you indicate
that the increase in selling, general and administrative expenses
were attributable to
increased employee compensation as a result of growing number of
staff, as well as
increased marketing and promotional activities and rental expenses
associated with
the expansion of our sales network without further quantification.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Ernest Greene, Staff Accountant at 202-551-3733 or Kevin
Stertzel,
Staff Accountant at 202-551-3723 with any questions.
FirstName LastNameTie Li Sincerely,
Comapany NameLi Auto, Inc.
Division of
Corporation Finance
August 15, 2022 Page 4 Office of
Manufacturing
FirstName LastName